Impact of energy prices and cellulosic biomass supply on agriculture, energy, and the environment: An integrated modeling approach

Abstract

The accelerated growth in biofuel markets has both created and reinforced linkages between agriculture and energy. The evolution of biofuel markets over the next 10–20 years and the implications for energy, agriculture, and the environment are uncertain. Building on an integrated agriculture–energy modeling framework, this study analyzes a baseline and three alternative scenarios: two scenarios based on energy prices (crude oil and natural gas) and one based on assumptions regarding cellulosic biomass availability. By examining the impact of scenarios driven by (a) changes in the energy sector and (b) changes in the agricultural sector, we can compare the differential effects on biofuels markets, commodity prices and quantities in each sector, and CO2 emissions. Scenario comparisons show biofuel markets affected more by crude oil prices than natural gas prices. However, higher natural gas prices shift the biofuel production mix away from corn-grain based to more cellulosic ethanol via multiple mechanisms. Alternatively, the scenario with no cellulosic feedstock lowers total ethanol production and raises ethanol and corn prices. In terms of environmental impacts, higher ethanol levels driven by higher oil prices lead to lower CO2 emissions. In comparison, the no cellulosic scenario results in the highest CO2 trajectory relative to the baseline.